The purpose of this paper is to discuss - through a case study - how conceptual and simulation system dynamics (SD) modeling can be used to enrich performance management in local government, to foster a common shared view of the relevant system’s structure and behavior among stakeholders, for territorial strategic planning purposes.

The government of a territory faces dynamic complexity, mostly implying: 1) different (public and private) stakeholders playing a key-role in affecting a territory’s performance; 2) difficulties for each player to detect the performance of the territory as a key determinant of its own performance; 3) misperceptions about the drivers and related strategic resources affecting the territory’s end-results; 4) inconsistencies in understanding and managing the accumulation and draining processes affecting the territory’s tangible and intangible strategic resources; 5) poor identification of delays and non-linear relationships between factors affecting performance; 6) flaws in policy-making, which often disregard framing trade-offs in time and space; 7) poor coordination among stakeholders in setting policies and understanding the causes of emerging problems.    

To cope with such recognized complexity, territorial strategic planning has emerged in the last two decades as a tool useful to guide and accompany the processes of local economic development. The adoption of such instrument leads to integrated urban or metropolitan development plans developed around long-term visions for cities and neighbour-hoods in their regional context.

Strategic planning emerges as an innovative process of extraordinary importance, since it coagulates the different actors of the local community (stakeholders) in a common effort aimed to draw the future of the territory in a long-term horizon and in multidimensional strategic frame embracing the urban, environmental, social and economic aspects of the community’s life.

This paper aims at demonstrating that framing dynamic complexity through SD modeling may support consensus building among different stakeholders, whereas a single player (e.g. a Municipal administration) usually takes a leading role in the strategic planning process. A Dynamic Performance Management (DPM) approach may also help such players to overcome possible barriers to collaboration, since it supports them to better detect how pursuing a sustainable development in the territory’s performance impacts on the sustainability of each single institution belonging to the territory.

This implies that territorial public agencies may better understand and communicate to their stakeholders that long term performance cannot be only assessed in financial terms, but also in relation to the outcomes that public services will be able to generate as value transferred to the territory. Likewise, the enterprises operating in a given territory should be enabled to detect that their own performance can be sustainable in the long run if they will be able to generate not only financial capital, but also social capital to the benefit of the other players belonging to the territory.